KPMG: Cloud services revenues set to soar

News Rene Millman Dec 10, 2012

New report tips cloud revenues to skyrocket over next two years as companies migrate apps

Cloud-based service revenues are set to double over the next two years, according to a new report by KPMG 

However, the report warned that providers fear showing evidence of cost savings is the biggest barrier to cloud adoption.

The report found the migration of data-heavy applications, such as business and data analytics, will account for a growing percentage of cloud services revenues over the next two years.

Providers said they expect the shift to occur despite users’ ongoing concerns over loss of control and data security, which are in addition to the providers’ challenges of proving savings and the business case.

Around six out of 10 providers say cost reduction is still the chief reason most business users migrate to cloud, yet almost 40 per cent said proving cost savings is their biggest challenge.  The challenge is further complicated by the fact that only 39 per cent of providers believe users have realistic expectations for cloud cost, while 19 per cent believe users don’t 

Providers see the top three challenges as: showing stronger evidence of cost savings (38 per cent), devising usage-driven pricing (31 per cent), and helping clients develop realistic business cases for switching to cloud (27 per cent).

“While providers are seeing the challenges of a maturing, yet still relatively young market, we’re at a pivotal point in the evolution of the cloud ecosystem as users become more comfortable with a variety of cloud applications,” said Gary Matuszak, a partner at KPMG’s Technology, Media and Telecommunications practice.

“Leading cloud providers know they must evolve to provide a new level of scale, capacity and capability.”

Nearly half of providers said loss of control has been a business user's biggest problem with cloud adoption, followed by data loss, and privacy risks, while 57 per cent of providers said they have been tackling data security issues with tighter restrictions on user access.

The study found that 59 per cent of providers have service level commitments in their cloud service level agreements (SLA). Over the next three years, 68 per cent said that they will have commitment parameters in SLAs, and 82 per cent expected data security to be the single-most prioritised SLA parameter.

Two-thirds of cloud providers think they are most active in software-as-a-service applications (SaaS) and predicted this will continue over the next two years, while platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) are also predicted to have the large rise during the period.